The IRS on October 21 issued transitional relief (Notice 2025-57) to substantially reduce the reporting burden for lenders required to report auto loan interest for the first time in 2025.
The One Big Beautiful Bill Act (OBBBA) created a new individual deduction of up to $10,000 in interest on loans for certain vehicles that undergo final assembly in the U.S. The deduction is in place from 2025 to 2028 and includes income limits and other restrictions. The OBBBA also imposed new reporting requirements on lenders to facilitate the deduction. Lenders must generally provide a statement to loan recipients reporting the total amount of qualified interest and other information, and then file a similar return with the IRS.
Notice 2025-57 provides penalty relief for lenders that satisfy their reporting obligation by providing individuals with a statement indicating the total amount of 2025 interest through an online portal, regular monthly statement, annual statement, or other similar means by January 31, 2026.
The penalty relief applies to both the requirement to provide statements to recipients and the requirement to file returns with the IRS, meaning that lenders are relieved of any obligation to report directly to the IRS for 2025. The IRS has released a draft Form 1098-VLI for IRS reporting, but it is labeled as a 2026 draft form. It appears for now that the IRS will not require or accept any direct reporting to the agency for 2025.
BDO Takeaway
The notice does not provide any substantive guidance on determining the amount of interest paid or whether the interest qualifies for the new deduction. Lenders issuing or administering vehicle loans may need to make reasonable determinations based on their own interpretations of the statute and should immediately begin collecting and tracking the necessary data from the beginning of 2025. Automated solutions may be helpful in collecting data and issuing statements.
Please visit BDO’s Corporate Tax Services page for more information on how BDO can help.